Further scope under EU milk reduction

IFA dairy chairman urges Minister Creed to open scheme to new applicants

8 Oct 2016

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Limited funds remain available under the EU milk production reduction scheme for a second round of reduction for the November to January period, according to the IFA's dairy chairman.

Sean O’Leary said the extra funding was there because the scheme had been slightly undersubscribed.

And he stated that applicants who delivered the reduction they committed to will receive payment on their full volume.

As the EU Commission confirmed it would proceed with this second round, Mr O’Leary urged the Minister for Agriculture, Michael Creed, to ensure Irish farmers who did not apply for the first round had the opportunity to do so for the second.

“Commissioner Hogan stated that the scheme was 98.9 per cent subscribed, with 52,000 farmers from 27 member states participating. This leaves a further potential incentivised reduction of 11,407 t of milk, equivalent to approximately €1.6m, for which EU dairy farmers who did not apply for the first round must apply by October 12,” Mr O’Leary said.

He said that Irish farmers had applied in relatively large numbers for the first round – 4,447 applicants – which was not surprising as most spring calvers had extended production well into last year’s back end. Tthey were not going to be able to do this year because of poorer weather conditions and tighter cash flow.

“While the leftover fund is very small, especially bearing in mind that the scheme is EU wide, and first-come first-served, we believe the Minister must ensure those Irish farmers who had not applied for the first round are given every opportunity to apply for this one,” he said.

Meanwhile, Mr O'Leary said multiple indicators were now confirming that the dairy market recovery was very much underway.

EU and global output was back, demand is picking up in China and other markets, and prices continue to lif, he said.

Mr O’Leary urged all in the industry to make every effort to leverage the best possible returns over the coming months, and to pass back every last possible cent to help farmers deal with their cash flow crisis.

EU supplies in July were back 1.4 per cent, July supplies in France were down nearly 1 per cent on previous year, while in early September weekly figures were back between 5 per cent and 7 per cent. German output for the first week in September was also back by 3.4 per cent. UK production was back 8.7 per cent for July, with the same trend continuing in daily deliveries to date. New Zealand was back 3 per cent in August, and Dairy Australia reported that July supplies were 10.3 per cent.

“The exception is the US, where August supplies were up 1.9 per cent (as against July 1.7 per cent), though the strong US dollar and domestic demand have meant a lower level of export activity. While global supplies are falling, we are also seeing positive developments on the demand front. Chinese dairy imports for the January to August period are up a massive 27 per cent. WMP imports increased by 22.9 per cent, infant formula by 31.4 per cent, while butter imports were up 34.6 per cent and cheese 30.2 per cent,” said Mr O'Leary.

Demand from Asia and South America for dairy products has also been up this year, with May figures showing a 7 per cent and 5 per cent year-on-year increase respectively.

“The upshot of lower supplies and improved demand is that market prices have been rising over the past four months. EU average returns based on the Milk Market Observatory reports have increased by over 9cpl over that period, to a late September milk price equivalent of over 30cpl,” he said.

Farmgate milk prices, which rose in Ireland in July and August are also rising into the autumn in Europe. Friesland Campina announced their third milk price increase, at 3cpkg to 29.25cpkg for October. In the UK, Dairy Crest, First Milk and Arla Foods have also been increasing milk prices for October

“It is clearly essential that Ornua and co-ops would make every effort to optimise returns from a fast recovering market place to ensure that farmers’ milk prices can be lifted above production costs and into positive margin territory as soon as possible,” said Mr O'Leary.

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